Rod Dreher

Rod Dreher


Maybe you shouldn’t own a house

posted by Rod Dreher

ourhousesold.jpg
Joe Nocera says the American dream of home ownership is one from which we ought to wake up. Excerpt:

[FDIC chair Sheila Bair] also pointed out that during the bubble, when anyone with a pulse could get a mortgage, the percentage of Americans owning homes rose to an unprecedented 69 percent, a number that was greeted with bipartisan hurrahs, but which turned out to be “unsustainable,” Ms. Bair said.
She concluded: “Sustainable homeownership is a worthy national goal. But it should not be pursued to excess when there are other, equally worthy solutions that help meet the needs of people for whom homeownership may not be the right answer.” Like, you know, renting.
The point is: the financial crisis might well have been avoided if we as a culture hadn’t invested so much political and psychological capital in the idea of owning a home. After all, the subprime mortgage business’s supposed raison d’être was making homeownership possible for people who lacked the means — or the credit scores — to get a traditional mortgage. It’s also why bank regulators and politicians were so willing to avert their eyes from the predations and excesses of the subprime companies.
Yet even now, it is difficult for the body politic to face this truth squarely, so intertwined is homeownership with the American Dream. Which is why Ms. Bair’s comments were so heretical. Maybe, she seemed to be suggesting, it’s time to break that link, painful though it would be. Maybe she’s right.

Nocera goes on to explore how our government and indeed our culture accepted the idea that home ownership was an unqualified good — which led to the government distorting the rational market for home ownership, which in turn led to the economic meltdown. More Nocera:

Gary Rivlin, my former colleague at The New York Times, has just published a scathing, important book, “Broke, USA,” which includes one shocking anecdote after another of people being conned into taking on mortgages, filled with hidden fees and adjustable rates, that they couldn’t possibly afford. The companies that did these things were not the outliers — they were the bulwarks of the industry: Household, Countrywide, New Century and a raft of others. And when state officials tried to crack down on these unseemly practices, the Office of the Comptroller of the Currency, instead of investigating, blocked their efforts. After all, homeownership was on the rise!

The best idea, Nocera goes on to say, is not to say “home ownership is bad,” but rather to re-emphasize, both in our thinking, our rhetoric and in government policy, that home ownership is a qualified good — meaning that it’s good for some people, under particular circumstances. And then we help those people (qualified first-time home buyers, in his view) out.
As somebody who sold his first house a week ago, to my vast, vast relief, I have a couple of thoughts.
We bought our place in 2004, after having lived in Dallas for a year. As I recall, there was never any thought of our not buying a house. We accepted the idea that This Is What You Do. The idea of continuing to rent was foolish to us. How many times had I heard the phrase that renting is “throwing your money down a rathole”? And in some ways, that was and is true. We were pretty sure we were in Dallas to stay, but on the off chance that we’d feel compelled to move someday, we were equally certain that we’d make money off the sale of the house we were buying. Because hey, housing values keep going up and up, right?
Now, six years later, we no longer live in Dallas, and we sold our house at a loss (the image above is our former house, taken by a friend and neighbor the other day, and e-mailed to us). Luckily, we bought the place low, otherwise the loss would have been much greater. I feel very fortunate to have cut the dead weight of our house loose — and, to be honest, emotionally conflicted about considering the house we loved so much to be nothing more now than “dead weight.” But dead weight it was. What we didn’t foresee, of course, was that there would be a colossal housing crash that would destroy the false idea that housing values could only go up. And we didn’t foresee that conditions would grow so dire in my industry, and so quickly, that we would conclude that it was irresponsible not to take this new job offer in Philadelphia. We were provisioned to carry that extra mortgage in Dallas for a few months, but if we hadn’t sold the Dallas house when we did, we would have been in real trouble, and would have had to rent it — and hope we got enough in rental income to cover the mortgage. There was no way to make enough off renting to deal with the hassle of managing an old house in a historic district from halfway across the country.
I can’t tell you how free we feel today as renters. The day may come — I hope it comes! — when we feel comfortable enough to buy another house. But with the economy so unsettled, it’s confidence-building to have no debt, and no commitment beyond our one-year lease on our apartment. The thing I worry about going forward, though, is that the economy will for a very long time — decades, at least — be so unsettled as to make home ownership excessively risky. I can say that the intense anxiety we’ve lived under these last six months our Dallas house has been on the market — the fear that the weight of our commitment to that house would sink us financially — made a deep impression on us, and is going to make it hard for us to buy another place in the future. It is quite a shift to go from seeing one’s house as a bulwark of security to seeing it as a millstone threatening to wreck one’s family financially.



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polistra

posted June 12, 2010 at 11:03 am


Agreed. The real problem is the semi-conscious mindset of “linear increase”, which is unnatural and new. When most people worked with physical reality, they naturally understood the circularity of nature. What goes up must come down and vice versa. The linear increase myth accounts for housing bubbles, stock bubbles, and the Global Warming fraud. All of these are transparently silly to a cycle-oriented mind.
Two big problems, though: the bubble decade has “flipped” a lot of formerly good rental houses out of the price range where it makes sense to rent them; and the idiotically low interest rates continue to make buying a lot easier than it should be.



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M.Z.

posted June 12, 2010 at 11:07 am


It is well and good to say that more people should rent. However, one of the biggest differences between here and places where people of means are likely to rent is that those places have significant renter protections. In the recently cited study (scam work) of economic illiteracy, these were the things that decreased property values except for the unenlightened. If you want renting to be a more viable option, you need to have the regulatory apparatus in place to make it worthwhile.
That all said, home ownership isn’t that great of an investment.



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Franklin Evans

posted June 12, 2010 at 11:32 am


There is too much to this topic to cover in one post. Readers and thinkers are well-advised to consider the entire topic and focus on an aspect of it while keeping the rest in mind. M.Z.’s point is one critical aspect here, as in who has not heard of the stereotypical slum landlord? I would imagine there are plenty who could be commenting here who have rented in places much nicer than “slums” who have also run into the same sort of landlord.
Here in Philadelphia we have it all. The rundown areas, the old established areas, the ritzy newer areas and the urban gentrification we love to hate, the one that “robs” those old established places and with rehabs and political maneuvering triples or quadruples the property values in a matter of a few short years.
Let us not forget that hybrid, the condominium. I find it ironic (having rented quite a few apartments in my time) that someone would want to “own” such a space, especially when they don’t actually own the land on which it sits. My daughter and son-in-law are teaching me how that works, having bought their condo just outside Center City in one of the oldest neighborhoods on the continent.
One thing more (or less, or enough): The Great American Dream of ownership is a delusion when so many have pretty much no basis in reality for their attitudes. How can renting be throwing your money away when you get substantial return for it? You know, stupid unnecessary things like hot and cold running water in a bathroom inside your abode, a place to store your food so it doesn’t spoil before you eat it, a place to cook your food that doesn’t involve building a fire outside (unless you choose to do that, of course), and the most silly thing of all: A place to sleep knowing that some animal (bi- or quadriped) can’t come by and do something nasty to you or your belongings.
Or, maybe, landlords are just a class of people we can safely hate from a distance. They don’t deserve our money! we can think to ourselves, while out of sight and mind they are barely making a living of their own from the less than 12 months per year rents collected from the same people who love to hate them.
Personally, I hate the term “home ownership”. I have always owned the space of which I thought of as home, and I come from a family that never, ever did anything but rent. My wife and I own our current house (about 9 years left on the mortgage), and might have made some decisions differently in hindsight, but that it is also our home is defined by the stability of place we’ve provided our children, the actual sense of community we’ve built and shared with our immediate neighbors, and the simple, mundane sharing of our daily lives with people many of whom rent and will always rent, but also consider where they live home.



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Indy

posted June 12, 2010 at 11:40 am


Yeah, there are advantages and disadvantages to both. Like you, I’ve lived in apartments and in houses that I own. The ability to itemize property taxes and mortgage interest at tax time is a factor that people point to in advocating for home ownership. Of course, no one knows what modifications will be made to the tax code down the road.
What too many first-time homeowners overlook is the need to have the means to handle costs, such as installation of a new heat pump or roof repairs or the many other things you can’t avoid in order to keep things in working order. Apartment living relieves you of knowing whom to call for repairs and checking around for estimaes. Whether you pay utilities or not as a renter, the apartment building’s owner absorbs the cost of and is responsible for taking care of major repairs. If things go wrong in your own apartment, you just inform the manager and a member of the maintenance crew shows up to deal with it.
Of course, the landlord usually passes some of the costs along to the renters, but in a large building, that is shared among many people. And you have the ability to give notice and pick up and move to a new apartment building, if you decide you no longer want to live there or pay the rent increases.
Neither renting or owning is without its upside and downside.



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Jon

posted June 12, 2010 at 11:47 am


Re: the bubble decade has “flipped” a lot of formerly good rental houses out of the price range where it makes sense to rent them
Huh? The bubble actually created a lot of rental properties, as house flippers rented their properties for a couple years before (trying to) sell at a big profit. Many of them got stuck with the properties though and have become landlords instead– I live in one such house, and did as well in Fort Lauderdale. Also, there were a lot of condos built which will never sell as condos and instead have been converted into apartment rentals.
Re: Or, maybe, landlords are just a class of people we can safely hate from a distance.
No reason to hate a landlord as long as they play fair and decent. A few do not and these rotten apples tend to spoil the whole barrel. My biggest hassle to date has involved security deposits, especially at the place I rented in Florida, where the landlady invented fantastic reasons to keep the whole thing, claiming it cost her $1000 to clean the house (a cleaning service would have done it, high end, for $300) and even charging me for a rusted gate latch as though I should be accountable for the laws of chemistry and Florida’s climate.



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Richard

posted June 12, 2010 at 12:03 pm


I agree with most everything being said here. It is a flaw in the modern (post-modern?) American character that we constantly want to make everyone equal – EVERYONE should own a home, get a car loan, qualify for college, etc etc.
The one thing I will point out is that the chief progenitor of all the sub prime mortgages was not some evil bank, but the federal government. Banks were REQUIRED to lend money to people who flat-out could not otherwise qualify for a home loan. Of course they loaded those loans up with fees and whatnot so they wouldn’t go broke when the loan went bad. I’m not defending the practice, but it groups like ACORN, Freddie Mac, and lots of congressmen on both sides of the aisle that practically legislated this mess.



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mdavid

posted June 12, 2010 at 12:04 pm


This is a great piece of writing. Tough subject, clear, and still written from a personal point of view.
Several points, both which show how terrible government interference in the economy are:
1) The primary reason for the bubble in real estate is
a) government offering loans to people, and
b) government offering tax breaks for borrowing on homes
2) If the government were to get out of the home business – kill Freddie and Fannie and stop tax breaks for buying homes – housing would drop 80% off the highs. This is their natural price level, and one that matches the salaries of the public.
Rod, Luckily, we bought the place low, otherwise the loss would have been much greater. I feel very fortunate to have cut the dead weight of our house loose
We own our home (built) and yet while it’s currently worth almost double what I’ve invested, most of that is labor, and I expect to lose money on the beast by the time I sell it. So if I were to pull off only a minor loss, as you have done, I would be very, very happy. In the future, home ownership will be a luxury that one has to pay for.



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Franklin Evans

posted June 12, 2010 at 12:06 pm


No reason to hate a landlord as long as they play fair and decent.
I agree, Jon. I was referring to those many (you and I being amongst the few, I’m assuming) who in fact run up more than security-deposit amounts of avoidable damage and mess, who think nothing of banking on local renter-protection ordinances and pay their rent two or three months late, [sarcasm] and who think of those things as their due privileges because, as we all know, landlords are scum of the earth and it says so right there! [/sarcasm]
About that passing the cost on thing: Here in Philadelphia, unless the landlord maintains his own repair reserve, he is paying for unexpected repairs out of his rental revenue. In a competitive market, that cost is not passed on quite as much as one might suppose, if it is passed on at all. The law here is quite clear: The landlord is not allowed to touch the deposit until the end of the lease (or after an eviction). It’s kept in legal escrow.



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hlvanburen

posted June 12, 2010 at 12:25 pm


“I can’t tell you how free we feel today as renters. The day may come — I hope it comes! — when we feel comfortable enough to buy another house. But with the economy so unsettled, it’s confidence-building to have no debt, and no commitment beyond our one-year lease on our apartment.”
I agree with you completely, Mr. Dreher. My wife and I have been apartment renters for almost 5 years now, and we could not be happier. Our landlords are wonderful couple who live down the street and maintain several properties in the area, each one in great condition. The rent is reasonable, the neighborhood is quiet, and we are ecstatic to be free of the albatross of property ownership.
The idea that owning a home is an investment was the seed that brought forth the real estate bubble. Housing is an expense, not an investment. The sooner we begin treating it as such the sooner we will see both property values and debt restored to more normal levels.



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M.Z.

posted June 12, 2010 at 12:35 pm


While slumlords can be a problem, once you get below the bottom end of renting, there are other problems.
1) Rent increases of sometimes over 20%. Places that have higher end renters have laws in place that limit price increases to around inflation and sometimes even offer the ability to appeal rental increases to an independent board when landlords are able to argue an increase was for cause.
2) Landlords can arbitrarily decide to non-renew a lease. Sometimes landlords will non-renew so they can remodel the place and rent it out at prices significantly higher than existing rents. If I’m a middle class renter, that means I might have to find a place in a neighborhood far from my work.
3) Renters are often excessively circumscribed from making modifications, even to the point of having to have particular window coverings.



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Alison

posted June 12, 2010 at 12:41 pm


Thank you for posting this today as it is something that is good for me to read. I am in my late 30s and don’t own; however, I feel more and more like I should own and am uncomfortable not owning. But I am not willing to buy a place on my current salary, and I want to have more money in the bank before I do. I am looking for a new job, and I like that I am mobile enough to be able to move pretty easily because I don’t own. And I realize that in today’s economy, if I want to move upward, I might need to consider a move. Nonetheless there still is the nagging feeling that I should own (I have no other debt at this time).
That being said, I am aware of home ownership stories that cause me to pause. One of my best friends is the primary breadwinner for her family, and she got into an untenable working situation. She was worried in the winter that she and her husband would have to file for bankruptcy because their bills including their mortgage got too large for them to sustain (and they could get little financial help because they paid their bills on time). She was extremely fortunate in that she found a new position in another city, and her company bought her house from her. Now she is renting and told me that if it were not for her three kids she would have no interest in buying. However, she is not the norm, and there are much, much worse stories out there.



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Rawlins Gilliland

posted June 12, 2010 at 12:44 pm


Interesting & of course true, but per usual I have an alternative reality check per realty.
First, I bought a house that was moderately priced… $66,500, in a modest neighborhood no one thought then or now of as ‘in’ or even close. That helps keep prices down. Then……. I financed it for 15 years even though I only made $22,800 per year when I bought it in 1983. Paid it out in 12 years. Then, when catastrophe hit my life in 2002 & I began drowning in debt & medical bills, etc., the ONLY thing that kept me off the streets was that I OWNED this house outright. Zero rent, no mortgage, nada. As a result, I was able to rebuild & never worry about the most fundamental dream ANYwhere…. a roof over my head was being taken care of.
My favorite story regarding home ownership: Last year I was on my roof when the ladder fell. I thought, ‘How the h___ am I going to get down?’ and then looked at the tree at the corner of the house. I decided it was close enough to lightly ‘leap’ to it…which I did…and climbed down easily. As I was about halfway down, I stopped for a second & thought, “My God! I am climbing down a tree that I planted when it was only three feet tall. And now it is my beanstalk.” That’s what it is to create ‘roots’, both literally & figuratively. Voila. Enter Frank Capra.
I sleep knowing that this is my house where I created a home, where I get to decide who can be on my property, who is demanded to leave, what to plant, what colors to paint anywhere…. total independent security highly seasoned with autonomy. Right or no, THAT’S the ‘American Dream’ to this Texan.



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Abelard Lindsey

posted June 12, 2010 at 12:45 pm


Nice post. Finally something that I agree with 100%



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Liam

posted June 12, 2010 at 12:46 pm


One tax preference that should be phased out over time is the mortgage interest deduction. It may take a 5%/yr phase out over 20 years, but it should be done.
I am not holding my breath for this to happen, of course. And that’s a powerful symbol of our political decay.



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Bradley

posted June 12, 2010 at 1:04 pm


Mobile folks usually shouldn’t buy.
and
The American Dream was not and never should be home ownership. That was secondary.
To the contrary, the American Dream (for most normal folks) WAS a steady, stable job with the promise of rising real wages.
A 30-year mortgage (fixed or ARM) is simply a *crap shoot* given the structural uncertainties of the labour market. If folks keep that in mind then the cost-gap between renting and owning would not become ridiculous – as it became in the bubble areas.
A comment section on this topic would not be complete without a … the-guvment-made-them-do-it post such as *mdavid’s* one.
As far as “natural” price levels go, to determine that level one would really need to go all the way and ask: At what price would some property trade … at 100% cash, with no mortgages available. Now THAT’S scary.



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RSG

posted June 12, 2010 at 1:15 pm


A few years ago, I bought a tiny bungalow, very inexpensive, because I could no longer afford to rent. Apartments the size I needed were raising rents far above what I could afford to pay for at the time. Two years after I bought my home, I suffered a 6-percent wage cut (I’m a journalist) and had I been in the apartment complex where I had rented for years, I would have been homeless. I have managed to keep my house, though it does keep me tethered to the community, and it remains likely the only way I will ever have anything of value.
What needs to be said is, I think, that home ownership has become “THE” American dream in part because employers no longer provide their employees with a sense of stability. In the nine years I’ve been at my job, I’ve gone years without any raises, had my pension eliminated, my benefit costs double, my FSA eliminated (while there was money in it) and my employer no longer contributes to my 401K. The house is the only thing I have in which I have any control or ability at this point in time to make things better for myself and to give myself, even if falsely, a sense of stability.



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Rick

posted June 12, 2010 at 1:16 pm


If the government were to get out of the home business – kill Freddie and Fannie and stop tax breaks for buying homes – housing would drop 80% off the highs.
Housing prices would drop, yes. So would home ownership rates, with these consequences:
More transiency
Less civil involvement — less citizen pressure for improving schools, social services, beautification, community policing.
More unkempt neighborhoods
More crime
More impoverished elderly. A 30 year mortgage is a forced savings program — almost guaranteeing that even a spendthrift homeowner will reach retirement age with a nice little nest egg, in the form of equity and freedom from housing payments.
Are all you folks who want to abolish subsidies for homeownership ready to add to the welfare rolls millions of homeless retirees who no longer have the income to pay rent?
Homeownership is worth subsidizing. Not everyone should qualify for the subsidies…but they should not be abolished. High home ownership rates are necessary for a healthy, involved, independent society.



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RSG

posted June 12, 2010 at 1:21 pm


Thank you, Rick. That was exactly what I had in mind.
Captcha: Here calmer–perfect



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Liam

posted June 12, 2010 at 1:26 pm


Actually, I’ve lived in largely renter-occupied neighborhoods with low crime and high levels of civic participation. They didn’t differ much from the owner-occupied neighborhoods. But the real estate lobby sure does know how to sell its tax preferences well.



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Aiming Higher

posted June 12, 2010 at 1:34 pm


Some quick observations:
1. Unless you owe no money on a house, don’t call yourself a “homeowner.” For all practical purposes, the bank owns it until you’ve paid it off.
2. A recent study showed that European countries with substantial percentages of rental housing had just as much (if not more) civic engagement, cleanliness, order, etc. as places with mostly “homeowners.”
3. For you true “homeowners”, try not paying your property taxes and see just how long your “inviolate” piece of land stays that way.
Renting isn’t perfect, home-ownership isn’t perfect. Different strokes for different folks.



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Indy

posted June 12, 2010 at 1:39 pm


Complicated. Depends on where you are in life, so no cookie cutter answers. I wouldn’t know myself but I do have buds who have talked about older folks they know who no longer can keep up with house repairs, physically or financially, but who don’t want to move in with relatives or into assisted living. The prospect of moving out of a house becomes very depressing for them, not only because of the hassle but because of what it says about decline in old age.
On the other end of the spectrum are those who want to move to find employment but are stuck. Or who need to spend money on other things on an emergency basis but are house poor.
Sully had an item (Thursday? Friday?) about longterm employment in which he quoted Ezra Klein:
“Areas where there are no jobs are also areas where the housing sector is devastated. So the people who are there can’t sell their homes, which means they can’t move to places where there are jobs, which means they just get stuck in this endless unemployment cycle. They’ve applied for what little is available, and until they’re willing to walk away from their mortgage, they’re just stuck without a job.”
Beyond that, you just have to know what works best for you. If you don’t care what color the walls are or what window coverings are allowed, an apartment provides all the mod cons without a lot of the hassle. I wouldn’t know about ordering people off of one’s property — haven’t ever had to do that — but even with a house you can’t do everything you want. I don’t mean just due to restrictions imposed by Homeowners Associations.
Depending on where you live, there still are codes that affect fencing heights, sheds, size of footprint on property, etc. There always are some rules and regs you have to obey. So you’re never truly autonomous. Also, what bothers one person doesn’t bother another. Some people focus on material autonomy, others on intellectual autonomy, the balance isn’t going to come out the same way for everyone in terms of needs and wants. Some people can live happily in situations others would find frustrating.



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Bradley

posted June 12, 2010 at 1:40 pm


Rick-
The *imputed income* from home ownership – especially for the elderly on fixed income – is of much value to both the owners and their communities.
The key is to think in terms of ownership, actual ownership, and NOT merely mortgage(ship)! [Pay off the d*mn loan]. Avoid second mortgages, home equity loans, etc.
This goes against the absurd advice of most financial advisors – most of whom seem to have never done an honest day’s work – and thus don’t and can’t understand what most folks need to do to be solvent.



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Rod Dreher

posted June 12, 2010 at 1:41 pm


RSG:
The house is the only thing I have in which I have any control or ability at this point in time to make things better for myself and to give myself, even if falsely, a sense of stability.
What you say makes a certain kind of sense … but it’s also the case, I think, that your home ownership keeps you bound to a job in which your prospects for stability are fast eroding. If you didn’t have the house, do you think you would have sought work somewhere else? I’m genuinely curious about that. Had we lived in a Dallas house that was less likely to sell than the one we owned, we would have had to have seriously considered turning down a job that promised more security for my family. Our real estate agent said that no houses priced at over $200,000 in our part of Dallas were selling. Ours cost significantly less than that, and still, we only had one offer on it in six months. We initially offered our house at $195K (it had been appraised at $210K), but eventually had to come way down. I figured that we might have to let it go at $180K, but that that would be the bottom limit. Boy oh boy, was I wrong.



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armchair pessimist

posted June 12, 2010 at 2:08 pm


I’ll bless to the end of my days an old girlfriend, who introduced me to being a live-in landlord. It was in a smallish, old East Coast city where there were lots of old 3 story homes in nice neighborhoods that had been broken up into apartments, usually one per floor—Philly must have lots. You get the roots that come with ownership (“It’s the land, Katie, the land”) and others to help pay the costs. If you don’t greedy, keep up the place, treat your tenants right so they want to stay, and can accept breaking even or darn close to it, it can work out well for everybody. Tenant/landlord relations are vaguely feudal, in the most benign sense of the word, even, dare I say it?, crunchy? The trick is to find a place and neighborhood that you love.



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BobSF

posted June 12, 2010 at 2:14 pm


which led to the government distorting the rational market for home ownership
Sigh. Rod is really down on “the government” these days. Leaving aside how “the government” got so wicked, under whose policies it became so awful, can we at least identify the true linchpin of the bubble? The government could have encouraged the tossing of mortgages from the rooftops to any Tom, Dick and Harriette who could grab one, but without the financial instruments that allowed companies to package those eventually worthless mortgages into “innovative financial instruments”, the bubble would not have happened.
Captcha: Ruing the (hehe)



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M.Z.

posted June 12, 2010 at 2:15 pm


Finance does not make things more valuable. Finance reduces the time discount. Used car prices are an area where you have quite a few cash buyers and quite a few financiers. There is no difference between the prices. While the analogy might be hard to understand, the effects on housing due to easily available credit is similar to the effect on commodities of moving from a barter economy to a cash economy. Anyone thinking that financing is adding 80% value is just crazy. The old norm was 5-year balloons which defaulted in mass under deflationary conditions.



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BobSF

posted June 12, 2010 at 2:17 pm


edit: “without the financial institutions”, not instruments.
(And, yes, I do recognize that allowing those practices was also a failure of “the government”, but it was one that doesn’t implicate the entire idea of owning a home.)



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Rawlins Gilliland

posted June 12, 2010 at 2:36 pm


Rod, to your last post, a subtlety to relieve the one-size-fits-all situation you recount as typical. Styles of home choices for those in that price bracket have evolved. The mid century modern homes of 60-50 years ago…like mine…are more popular now with the under 50 crowd than wooden 1910-1935 bungalows.
(To that point, people are always asking me if I am interested in selling my house, even offering me cash. Decent prices, actually. Not currently interested.)
Plus, and I can say this now but would not have done so when you lived here,…that neighborhood is not, shall we say, unfamiliar with (heavy, even violent) area specific & adjacent crime. That was always kept sorta quiet because of the real estate lobby, HOAs & your own newspaper’s (then) tendency to downplay the area of crimes when they were within a sphere heavily populated with their business add revenue accounts. The Dallas News circulation dept. is now under the advertising dept. That’s telling.
Also, Auburn Heights and other aspects of your recent ‘Old East Dallas’ (where I grew up) have endemic terrible foundation problems since those houses were built on black gummy dirt near or atop erased (now underground) creeks. Had I known you when you were house hunting, I would have screamed, “Foundation Problems Ahead!”. There is NOTHING more unrewarding than paying many 1000s of dollars to have the foundation leveled. A roof we can live with. But a house built on a bad foundation? The very word ‘foundation’ says it all.
That is precisely why, when I inherited the 1912 house within walking distance of your (then) home, I sold that wooden termite attracter, despite its charm & beveled door glass, etc., for a brick ranch style built on solid rock on a flood-proof hill. Ironically, in your case the adjacency to ‘Lakewood’ was a selling point, in no small part because of the reputation of the very Dallas ISD schools you eschewed. So you paid the price for a family friendly public school trend area w/o any interest in utilizing the very selling points that made many people pay the inflated prices of that area between Gaston & Columbia. So your saga, while a cautionary tale, has subplots. The devil was in the details.
In any case, I miss y’all.



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Indy

posted June 12, 2010 at 2:45 pm


Gee, RG, for Rod’s sake, I hope the new owners have gone to settlement already and that it truly is a done deal.



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kevin s.

posted June 12, 2010 at 2:54 pm


Actually, I think a return to the old paradigm, home ownership as dream fulfillment, would be a good thing.
For the last 10+ years, houses were sold not only as investments, but as revenue generators. The mere act of holding and selling property could, we were told, become a career unto itself.
As such, buying a home became as complicated as investing in stocks or mutual funds. Alas, unlike stock brokers or financial reps, mortgage brokers have no fiduciary obligation to their customers.
Banks famously fell in love with sub-prime loans, and offered incentives to brokers to sell these crappy deals even to those who could afford a standard loan. So home buyers were presented with phony amortization schedules, teaser rates, and bogus “good faith” estimates.
Etc… Etc… Point is, the housing market is ill-equipped to become an investment vehicle. There are too many variables, from capricious city leaders to property taxes to geographical concerns, to make investing in the “housing market” a sensible decision.
However, if people are set to buying a home for reasons of personal autonomy (the core of the American dream paradigm), the market will take care of itself. Over time, owning a home will be the right fiscal decision for the majority of those who can afford it.



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Pat

posted June 12, 2010 at 2:56 pm


I remember the chorus of ‘you’ll never see your rent money again.’ It was like a bunch of frogs, all croaking the same tune — but in my case, made about as much sense. I actually had enough money to buy a house, if in a lesser neighborhood than I currently inhabit, and I calculated that if I put it in savings, the interest would cover most of my rent. I’ve never regretted that decision for a minute. I have a place to live in an area where home ownership would have taken up my retirement savings – plus, I have those savings still in the bank.
As for condominiums, has anybody else heard that terrifying NPR report about the people whose neighbors in the condominium building were foreclosed on? The banks wouldn’t pay the fees on all the condos they had repossessed, or even clean them out, and the few non-foreclosed-on folks were living like squatters in their own building. At least if the bank forecloses on half the houses in your block, the city doesn’t turn off the electgricity and plumbong to the whole neighborhood!



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Cecelia

posted June 12, 2010 at 3:04 pm


We tend to blame this housing collapse on the low income homeowner and the policies which we think encouraged the low income person to buy a home. The statistics do not bear this out – low income home owners were a small piece of the homeowner pie. It is important I think to keep in mind the fundamental cause of our problems – the decline in real wages. The banks etc responded to real wages declining – there was a need to keep the consumer economy going – hence the availability of cheap and easy credit/mortgages. The real cause of our problems was this cheap easy credit and the decline of real wages. Pay people a living wage and we do not need cheap easy credit and the problems such creates.
We used to build small modest affordable homes – homes affordable to a working class person. But now if a developer gets an acre of land he is not going to build a small home – he is going to squeeze three McMansions on that acre so as to maximize his profit. But he can only sell those pricey homes if there are policies which keep interest rates low and the down payment small. If people had to put up 1/3 the price of those expensive homes there would be far less people able to afford them – and so the developer would go back to making smaller more affordable homes. We were told that the Bush administration was coming up with all these policies that made down payments smaller and loosened credit requirements so we could help the low income family become home owners – but in fact – we just encouraged the building of larger more expensive homes. Those big houses also inflate the value of the smaller homes in the neighborhood – pushing the modest income person out. The people who benefited from cheap and easy credit weren’t modest income people – it was the real estate developers and realty companies.



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hlvanburen

posted June 12, 2010 at 3:31 pm


“Actually, I think a return to the old paradigm, home ownership as dream fulfillment, would be a good thing.”
Only if it is coupled with the notion that purchasing a home is an expense rather than an investment or savings for retirement. The former is a responsible approach to housing. The latter two are reliance on Ponzi schemes.



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Abelard Lindsey

posted June 12, 2010 at 3:35 pm


People who cannot be bothered to do yard work have no business buying a house. It irritates me no end when people do not maintain their yards and they become messy. It does not take that much work to maintain a yard (a few weekends worth per year). Messy, junky yards is one of my pet peeves.



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RSG

posted June 12, 2010 at 4:05 pm


Actually, Rod, the house does tie my down. I’m experiencing it right now. I made a commitment however, to my location, over my career (staying at a mid-sized daily instead of going to a larger city) in order to be closer to my family and my church home. As a single woman, though, the house does give me something to do with myself, causes people to see me a bit more seriously (as a functioning adult), and provides some other intangibles. I love being a homeowner. A lot.



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mdavid

posted June 12, 2010 at 4:13 pm


Leaving aside how “the government” got so wicked, under whose policies it became so awful, can we at least identify the true linchpin of the bubble?
Sure. It’s not the government itself that is so wicked; the government has no soul. But to understand how our policy became so wicked, simply read RSG and Rick above. They typify the liberal mindset that by manipulating the economy works. Unfortunately, their type has been the majority long enough to create the housing bubble and are still unrepentant. So it’s going to have to get a lot worse before anything else gets fixed.
But this mindset is not malicious. It’s merely the false dream that “moralistic” ego-driven policy can do a better job at driving the economy than a fair free markets. This is what destroyed Russia in less than 100 years, came close to getting the West during the 1930′s, and will probably get us this time around.
A free market doesn’t give people what they want. It gives them what they deserve. Hence, it cannot be tolerated by liberals, who wish to play God and change the rules of life. Sadly, progressives likely have the numbers to destroy the economy this time around, and that why it’s so critical for people to save their money and prepare for a grim future in the next decade or two. This should make the prior depression look tame.



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elizabeth

posted June 12, 2010 at 4:14 pm


At some point in Minneapolis in the 1990s, rents became so outrageous that even working at grocery stores as cashiers bought houses because that was the cheaper option. The ratio of rents to house prices is a moving target and people make long term decisions based on changing conditions, hoping for the best.
The recent housing bubble was the result of a combination of deliberate adjustments in the financial world and the world of regulation, largely promoted by Dick Graham and the last administration, but certainly the opposition party went along with it. Let’s hope this deregulation hangover has us reconsidering Reagan’s “government is the problem” mantra. The New Deal regulation structure prevented the country from such a major crash for a long time. Deregulation as religion should be abandoned. Conservatives understand that people need rules – why did they forget that?
CAPTCHA: us bypassed



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mdavid

posted June 12, 2010 at 4:17 pm


Sorry, change that that by manipulating to “that manipulating” and and that why to “and that’s why”. Fingers slow.



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Indy

posted June 12, 2010 at 4:20 pm


MDavid, methinks you’ve misread the numbers. No, not the economy. The public. Did you see
http://wpht.cbslocal.com/2010/06/11/smerconish-in-the-washington-post/
Based on that, how would you word what you just wrote? Or do you think these issues need only be argued on the fringes?
I’m serious, dude. I so am puzzled by posters who write as if the U.S. consists of right and left voters and policies to match when to people like me, there’s a whole lot more going on.



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Scott Lahti

posted June 12, 2010 at 4:46 pm


Have a look at the column. Homeownophobia by Wall Street Journal mainstay Claudia Rosett. It is a potent blast against the American Dream, our teary sentimental belief in the steaming, reeking pile of scat at the end of the rainbow as we shuffle, hat in hand and with sootfaced snotnosed brats in tow, toward that More Abundant Life For All only one adjustable-rate mortgage, Cialis prescription, Carnival cruise, senior scooter, Swiffer Wetjet and Apple iDead smart-casket away.



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BobSF

posted June 12, 2010 at 4:48 pm


No, not the economy.
If one thinks the problem out there is the drop in the bucket of inner-city mortgages for $150K homes versus the tens of trillions of dollars in uncollateralized instruments in the wholly unregulated derivatives market, I’d say one was misreading the economy, as well.
But, as mdavid says, we do deserve what we’ll get when that free market goes pfffffffffffffffff….



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KateA

posted June 12, 2010 at 4:53 pm


This has been a depressing bunch of comments to read. I’m buying my first house in 20 years (closing in a couple of weeks).
In my part of the world, rents are ridiculously high. I can no longer afford to rent. Houses are, for the most part, still over-priced here, too. Not that my city is in particularly good shape economically. Housing prices have come down but they are still high for the $50K a year range individual or family.
I’ve managed to find a 50 year old house that has already been sufficiently renovated and maintained that I felt comfortable with taking on the responsibilities of home ownership.
Compared to renting, I’ll save $400+ per month off the top. That savings includes taxes, insurance and mortgage payments and is before taking into account the deduction of interest and taxes from my income tax return. Looks like I’ll be able to itemize for the first time ever.
Landlords here establish rents based on their mortgage, insurance and taxes. Most maxed out their debt levels before the housing downturn and can only maintain their position by charging tenants all their carrying costs.
Apartments in decent complexes are only nominally less expensive (but with much less square footage).
I have no illusions that I’m investing by buying a home. Just trying to stop losing ground.
Capcha: had enzyme



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Scott Lahti

posted June 12, 2010 at 5:01 pm


As if to goose my nihilism even further, I scoot over to Yahoo and find this illustrated Onion-worthy headline in the marquee news-banner, by itself enough to copper-plate Mencken’s belief that to be an American is to laugh oneself sick to sleep every night:
Diddy defends $360,000 car for son
Yes, children, we realize that this is America, where a father can give his son when he turns Schweet 16 whatever bloody well pleases his inner
Nebuchadnezzar – the same America in which we are in turn free to sculpt killer abs in the even more entitled and gutsore shaking of our jellied bellies resulting, though the neighbors in the next apartment pound the walls to tumbling…



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Indy

posted June 12, 2010 at 5:03 pm


Scott, dude, you gotta get out more. There’s a whole lot more to America than that.
KateA, I get it. I own a house. High rents weren’t what drove me to buy, there were other factors. But I do live in an area where rents trend high, in part because there aren’t many of the old garden style apartments left that I lived in as a kid. Don’t be depressed, just keep in mind that not all housing markets are in the same fix, rental unit availability and pricing vary from area to area. We may sound like know it alls but really, we’re all just regular dudes talking about our own individual experiences, nothing more, nothing less. Do what is right for you based on your calculations and your knowledge of local conditions. Rod bought his place when conditions were very different from what they are now, both in terms of the job market for his field and housing. Many of the rest of us did, too.



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BobSF

posted June 12, 2010 at 5:08 pm


Do you notice, in these threads about home ownership and how “the government” is to blame because it forced all sorts of first-time buyers to jump into the market, that no one talks about the really HUGE portion of the problem? I.e. all the home owners who refinanced.



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RSG

posted June 12, 2010 at 5:09 pm


KateA, that is exactly why I bought. Only you know what your financial situation is and good luck to you. May your house give you as much joy as possible.



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Scott Lahti

posted June 12, 2010 at 5:13 pm


As part of my life’s odyssey in fleeing Progress and as many of its siren-sung works and ways as much as feasible, I’m planning to move later this year to a small town in the Acadian, heavily Francophone northeastern edge of my state, Maine, and am tempted to buy a neat little two-bedroom house – one-and-a-half bedrooms more than I need – currently selling for $27,000. Assuming I can make the monthly mortgage payments of c. $190, the temptations are palpable.



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Rick

posted June 12, 2010 at 5:15 pm


They typify the liberal mindset that by manipulating the economy works.
Liberal? I’m pretty sure increasing home ownership was a proud goal — rightly so — of the Bush Administration.
If everyone who thinks government has some role in overseeing the economy…through tax incentives, subsidies, federally-backed loans, minimum wage laws, regulatory mandates, and setting interest rates…is a “liberal”, then the number of people who qualify as “conservative” is vanishingly small.
Certainly your definition of conservative would exclude the bulk of GOP politicians…and anyone who takes seriously the social teaching of the Catholic Church.



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michael

posted June 12, 2010 at 5:17 pm


“The thing I worry about going forward, though, is that the economy will for a very long time — decades, at least — be so unsettled as to make home ownership excessively risky.”
I don’t see why this should be a worry for you. You have done the prudent thing by renting. You have minimized your obligations and maximized your flexibility. A home is a home, whether you own or rent. More people should do as you have done.



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Scott Lahti

posted June 12, 2010 at 5:24 pm


If everyone who thinks government has some role in overseeing the economy…through tax incentives, subsidies, federally-backed loans, minimum wage laws, regulatory mandates, and setting interest rates…is a “liberal”, then the number of people who qualify as “conservative” is vanishingly small.
What about those of us who not only see no role whatever for government in any of those areas and far more, and for whom the “vanishingly small” ranks of those qualifying under the tightened strictures as “conservative” are still too socialist by half? Don’t we get a label, too? Or do we have to settle for terrorist like everyone else by the year 2020?



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steve

posted June 12, 2010 at 5:30 pm


“It’s also why bank regulators and politicians were so willing to avert their eyes from the predations and excesses of the subprime companies.”
Not the only reasons and probably not the main one. Everyone in the financial sector was making millions. Traders, bankers, etc. are basically amoral, at best, when it comes to making money. They do not care if they put people in homes. They just want to make money. Politicians wanted a booming economy. What we were really seeing was stagnant growth for most people, but right wing economists/pundits responded by saying that people’s total wealth was growing because of housing values.
having read a couple of dozen analyses on the GSEs, I would recommend Russ Roberts version, he writes at Cafe Hayek, as the most readable. Even he notes that the GSEs were losing share as the subprime market took off. Towards the end, a lot were dumped into the GSEs as the investment banks bailed out.
While the GSEs were an amplifier, they were not a necessary part of the crisis. You needed securitization, low interest rates, AAA ratings and some way to keep individual states from interfering in the boom. Last of all, but not least, you needed some way to turn $2 trillion worth of mortgage losses into $30-$40 trillion worldwide. (Yes, it was a worldwide crash. Even places where F and F do not operate.) That took the shadow banking system, synthetic CDOs and the CDS market. You had large bets not involving, directly, the value of the mortgages they bet on.
Would I like to see the GSEs gone. Sure. Get rid of the home mortgage deduction also. But, if you think this crisis was all about the GSEs, then your fix will be wrong. Eliminate Fannie and Freddie and you still have all the necessary components to repeat the crisis. Well, maybe you would need some of the old regulators back, the ones with Rand tattooed on their chests.
Steve



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Andrea

posted June 12, 2010 at 5:39 pm


I make peanuts as a reporter. Home ownership was never a realistic option for me even a few years ago before it got really bad in the industry. I would have been eligible for breaks as a first time home buyer but I also took a look at the hidden costs I’d be taking on, like property taxes, repair bills, lawn care, etc. and decided I didn’t want to deal with it. On the other hand, In the area I live the economy is strong because of the oil industry and affordable housing is nearly impossible to find. My rent has gone up about $200 a month in the past three years. I need a second job to afford the increases. Neither option looks very attractive right now.



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kevin s.

posted June 12, 2010 at 5:45 pm


“If one thinks the problem out there is the drop in the bucket of inner-city mortgages for $150K homes versus the tens of trillions of dollars in uncollateralized instruments in the wholly unregulated derivatives market,”
This is a false dichotomy. The $150k bad loans were part and parcel of the market. The problem is that any regulation is likely to be the sort of Monday morning quarterbacking that yields frivolous, ineffective legislation.
That aside, the housing market is not at all reflexive of a free market. Turning interest into a tax deduction encouraged home buyers to take loans that were interest heavy. And that’s just one of the ways the government has manipulated the market.
As to the question of regulation. Government did not enforce the regulations in place. Congress never devoted funds to allowing the FBI to root out bad mortgage brokers. Golden West and Countrywide were able to bribe their way into shirking accountability. Hell, Golden West’s former owners used their political connections to force SNL to edit out portions of a skit that painted them in an unfavorable light.
Chris Dodd, the chair of the Senate banking committee, in addition to being a wholly owned subsidiary of Countrywide, lobbied Bill Clinton for a presidential pardon for a Bear Stearns exec found guilty of insider trading. The exec returned the favor with a sweetheart land deal on an Irish Cottage.
And Dodd is STILL the chair of the committee.
This is the government we are supposed to trust with oversight of the market? These are the people we want looking for an ass to kick?
I’d better get my checkbook ready.



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Indy

posted June 12, 2010 at 6:07 pm


RSG, I second your comment to KateA.
Scott, I don’t know when you’re writing as parody and when you are seriously, you’re an unknown here to me, and I’ve been reading Rod’s blog for almost a year now. Until this week, I’d only read one or two of your posts although I think you’ve posted more than that. But it sounds to me as you just identified yourself as being on the right. I was wondering on the mob thread if you were right, left or center when I asked about Stephen Ducat. Hah, got my answer now, I think. Unless the label question was a joke.
I have voted for conservatives in the past, as I have liberals, also. We Indys tend to do that, we pick and choose based on a complex balancing of factors. Thing is, if you read your history, you see that once in power, most administration tack center-right or center-left. Republican presidents have done some progressive things and Democratic ones some conservative or moderate things. If you read their bios, you see that they and their advisors mostly try to work out what is best for the nation, sometimes going against their own base. Hence a bailout by Rs in 2008, consultation by Ds with Volcker in 2010, etc.
Problems with regulation tend to be systemic. Most regulated industries have very, very heavy lobbyist presences in Washington. I mean heavy. Like it or not, they’re going to influence the way things are done, no matter which party is in power on either end of Pennsylvanita Avenue. To overlook that is to enter Neverland. Home ownership fit both parties’ agendas because if you tilt pro-business, you encourage consumption and buying, not frugality and saving. If you’re pro-worker, you want people to not give up on the American dream and feel shut out and alienated. And we voters love us some “we can have it all” talk, oh, yeah. To argue that this is a problem that can be laid at the doorstep or one party or the other, only, is nothing but a dodge.



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m.e.graves

posted June 12, 2010 at 6:16 pm


Where I lived, the price of renting and the price of buying a home were almost the same. I rented while my sisters owned. I’m out of the country now, but when I return, I wanted to buy a home. Is it really your home if you have to ask permission from someone to do something as little as paint the walls? What about having a garden? No, my family has always taught me that in the long run, you will pay off your mortgage and have a home that is yours, whereas the renter has what?
And there are some that want the mobility to move around so that they can “move up” – is that really crunchy? I think of the line from Titanic given by Ruth to Jack Dawson – “You find that sort of rootless existence appealing, do you?”
captcha: gaydos cruddier. Oh come now, Captcha, now you’re just being offensive.



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Indy

posted June 12, 2010 at 6:54 pm


Had a few minutes to think about that label question. My answer? Labels don’t matter, they’re largely pointless. That Michael Smerconish column refers to the way some people tilt right on some issues, left on others, moderate on still others. It sounds from recent polling as if the majority of the people in the U.S. are in the center, moderates. Since one party is identified as conservative, and one as liberal, that suggests that there are an awful lot of Americans who cope, quite well it seems, without being part of the pundictocracy’s artificial labelling of winners and losers. Maybe pragmatism and an acceptance of man’s limits (whether through faith or otherwise) and acknowledgement of the world as it is, not as one would wish it to be, explains the greater sense of serenity than one finds among ordinary citizens, as opposed to activists. Sure, we all get mad and frustrated sometimes. But that doesn’t define or rule us.
Maybe that’s what sustains our democratic form of government. There are enough people around who don’t insist on total control of the agenda, don’t insist on winning on everything. Their parents, or life, or their church, or all three, have taught them it doesn’t work that way. So they (I certainly) accept that you win some and you lose some and that’s how things go.
Most of us manage to live quite happy, productive lives, without sinking into despair or anger over our inability to control events or our surroundings. I personally don’t think house ownership is the key to personal happiness, although it can be a part. You can be your own man even in prison (see: Nelson Mandela, Alexander Solzhenitsyn.) It is what you carry inside,not what you see around you, that ultimately defines your personal autonomy or lack thereof. Coping skills matter the most.
Even in a house, you might have noisy, disruptive neighbors. Unless you live on a huge lot in the middle of “nowhere,” you’re going to hear neighbors’ music playing at times,when they have the windows open, be aware of their power mowers being used, hear guests laughing and talking at a backyard barbecue next door, hear children at play. Life happens around you, wherever you live. A perfectly controlled environment just isn’t possible.
Shorter version: None of us get everything we want. Life is about acceptance, grace, and where appropriate, compromise and acknowledgement of our place in the world. At least, that’s what my Mom and Dad passed on to me as the most important.



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Rick

posted June 12, 2010 at 7:03 pm


Or do we have to settle for terrorist…
Scott, no, I wouldn’t say terrorist. I think “nut” will do. >.
I don’t even know what an utterly free market would look like. Probably like Hobbe’s state of nature: nasty and brutish.
Mdadvid, you really want government 100% abscent from the economy?
No obscenity regulations?
No patent or trademark protection?
A huge underclass of exploited or just poorly-adapting poor folks…whose desperation can quickly fuel murderous riots?
(See Rod’s recent posts on mobs to see what those murderous riots might look like. Or rewatch “Spartacus”).



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BobSF

posted June 12, 2010 at 7:19 pm


This is a false dichotomy. The $150k bad loans were part and parcel of the market.
It’s not a dichotomy at all. They are, as you note, two parts of a problem, one teeny and the other ginormous (oddly acceptable to spell check).
In the same sense that, for instance, communion wine and drunken frat parties are both parts of the crisis of teen drinking…



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elizabeth

posted June 12, 2010 at 7:23 pm


BobSF wrote:
“Do you notice, in these threads about home ownership and how “the government” is to blame because it forced all sorts of first-time buyers to jump into the market, that no one talks about the really HUGE portion of the problem? I.e. all the home owners who refinanced.”
Good point. Five houses down from us is a house sitting empty thanks to our former neighbor. She is a lovely, conservative Christian woman who refinanced frequently while the (theoretical) value of her house went up during the bubble. She paid for Christian high school and college educations for her children that way. No plan to pay the loans back, apparently. She stopped paying and let it go into foreclosure.
Other people put in fancy kitchens and bathrooms, or built decks or bump-outs.
No, it was not just first-timers who caused this. Greed knows no political party or religious preference. Or class or economic status…



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Neil D

posted June 12, 2010 at 7:42 pm


As a single person, I’ve rented upscale apartments for years. It allows me mobile and I’ve changed jobs several times very easily.
I’ve not come across too many rental communities where people really socialize as they might in a suburban subdivision. People tend to keep themselves.



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RP

posted June 12, 2010 at 8:08 pm


The term “homeowner” should be dropped because you do not own your home if you have a mortgage – you own debt. A more proper term would be “homedebtor.” Referring to mortgage holders as homedebtors may have the desirable effect of encouraging people to consider what it really means to “purchase” a home.



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KateA

posted June 12, 2010 at 9:33 pm


Thanks, RSG and Indy. I’m realistic and hopeful (and financially conservative).
Capcha: nuclear larynges



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Connie Connie in Wisconsin

posted June 12, 2010 at 9:57 pm


So, what are the home-buying lessons illustrated in this thread?
1. Don’t buy more house than you can afford–on one income. Don’t let the real estate agent talk you into buying more than you know you can afford.
2. Buying a duplex and renting out half (or spare bedroom, or basement) seems to be wise.
3. Don’t refinance & refinance & refinance if you are taking out cash each time–have an eye toward paying off your loan. Your house is not an ATM. Ignore the “financial” “advisors” who tell you otherwise.
4. Don’t live where jobs aren’t plentiful. (Hah.)
5. Think about where you’re going to live, and how you’re going to afford it, when you retire.
6. Fix it up yourself, rather than borrowing money to do so.
7. Don’t choose overpriced metro areas.
8. Make a healthy downpayment.
Personally, we bought our place 13 years ago, and have it nearly paid off. Refinanced from a 30 to 15 year loan three years ago when the rates couldn’t be beat, and have paid extra every month, and mostly have done it on one income. We don’t love where we live (the area), but it has worked for us so far. Yes, property taxes keep going up.
The important thing seems to be to live in an area where you are pretty sure you can find work. If you are thinking about moving for your job, any job, consider the cost of housing (and the cost of changing housing) where you are going in addition to your new salary.
Being proust? I don’t think so!



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rr

posted June 12, 2010 at 11:01 pm


quote: “The term “homeowner” should be dropped because you do not own your home if you have a mortgage – you own debt. A more proper term would be “homedebtor.” Referring to mortgage holders as homedebtors may have the desirable effect of encouraging people to consider what it really means to “purchase” a home.”
Yes, I think this is an important point to remember. Owning a home isn’t for everyone, especially the financially unstable or unwise, nor is it for every stage of life, especially more transient ones. And as Connie points out, one shouldn’t buy more home than one can afford and one should put down a decent downpayment, generally in the 10%-20% range if not more. We bought our first home nearly two years ago and the mortgage (including property tax and insurance) is nine dollars more a month than we were paying in rent. Clearly, it was worth it as it gave us more room and more freedom (to paint walls, plant things, etc.) than before.
The real advantage of buying a home is the long term one. Buying a home generally involves a mortgage and thus debt. But as long as one is responsible, this is debt that one is constantly chipping away at. And unlike a car, over the long run (yes, there are downturns in the market) property does tend to appreciate. In 30 years, and in less time if one makes extra payments, one will own the home free and clear while those who have been paying rent will still be paying rent. When one retires and goes on a fixed income, owning a home free and clear is a big financial advantage. So in many ways, and this is important for those who have knocked having a mortgage, buying a home should be part of ones’ thinking about retirement.
captcha: reason survives
rr



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audra

posted June 13, 2010 at 1:44 am


Your sentiments echo exactly how my husband and I feel. We bought our first home 4 years ago and w/ the value now estimated much lower than we purchased it for, we would either have to sell for a loss or rent should we ever need to move. If we do move, we will for sure be renting. And feeling much more free to know we will not have to worry about bearing a “burden.”
When we bought all we heard from other people was what a great “investment” it was to own, how it was so much better than “throwing away rent money.” But with things the way they are these days, we aren’t sure we can ever see it that way.



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Karl G

posted June 13, 2010 at 6:00 am


“And unlike a car, over the long run (yes, there are downturns in the market) property does tend to appreciate.”
Not significantly, once you count inflation into the mix. In fact, people should be thinking of homes much like they think of cars- buy it if you need the benefits from it, but don’t expect to make any direct return on it.
If you’ve got a good downpayment to put on a home, odds are, you’ll come out far better in the future if you put it into a well managed investment account than you will once you account for money sunk into interest and maintenance on a house.
There are some areas where property prices are low enough to make buying worth while on the bases of direct cost. But that appreciation? You’ll generally find that it amounts to something on the order of 2%/year; a totally miserable return by any other standard.



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Jon

posted June 13, 2010 at 7:31 am


Karl G,
One reason housing got disastrously miscast as an investment is due to the fact that rates of return on just about everything have been miserable for some years now. The stock market crash ten years ago soured people on stocks and I see 401ks as the worst deed of the entire Carter administration, beggaring most people’s retiremnts. Plain old bank accounts haven’t paid good rates since I started college. Housing seemed to be holding up so money flooded into it. But the truth of the early 21st cnetury seems to be that while the very rich can still get richer everyone else is mired in low, low rates of return.



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pj

posted June 13, 2010 at 7:36 am


bought in 1988,
prices dropped 30% to underwater in 1990,
but we kept on paying,
regained original value in 10 years,
about 2.5 times original value by 2005,
value still double original value today,
never took equity out, only two payments left.
fewer neighbors is worth it.
buy a house now while prices are at a low.
that is what the smart money is doing now.



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Franklin Evans

posted June 13, 2010 at 10:54 am


My own view of sanity in home ownership:
We’ve lived in this house, paying the mortgage, of 25 years. In that time, property values have gone up and gone down. We did not and do not pay attention, because we are not selling our house tomorrow, next month or before the next decade, so of what use is it to worry today?
Only those who are looking to make a profit on a property should worry, and the rest of us should not care if they make their profit or not. For people in that middle area of the spectrum, who (like Rod and his family) are looking for a stable home and a future return only secondarily, it becomes some balance between serendipity and bad timing. We can care about them personally, but again, what else should we feel or do? Pass a law removing all risk from real estate investment?
I’m just done with all the sob stories being definitional of the general case. We need laws that make sense, not laws that make us feel good. I’m just lookin’ for some sanity in an insanity world…



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rr

posted June 13, 2010 at 10:59 am


quote: “Not significantly, once you count inflation into the mix. In fact, people should be thinking of homes much like they think of cars- buy it if you need the benefits from it, but don’t expect to make any direct return on it.”
This isn’t quite right. The vast majority of cars depreciate in value, often greatly in value, not counting inflation. Also, even if inflation eats much of the value of a home’s appreciation, one still builds equity in home over time, especially if one is wise enough to make extra payments, which has a compound affect on reducing the amount of the mortgage. Making money on a home takes time. But it is done as the value of the home goes up on the one hand and the debt owned on the home goes down on the other.
Housing is a basic human need that one will need to pay for one way or the other either by renting or buying. But one only builds equity through ownership, which is why in the long run the old saying about “throwing away money” on rent is true. If one can’t get around spending money on the cost of housing, why not make money on it in the long run? Of course, this only applies to those who are financially stable, willing to live in the house for several years, and don’t buy more house than they can afford. I think part of the problem with our current housing mess is that people forgot some of these important caveats and consequently took foolish risks.
rr



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Anonymous

posted June 13, 2010 at 11:54 am


4. Don’t live where jobs aren’t plentiful. (Hah.)
7. Don’t choose overpriced metro areas.
Ahh, there’s the rub, isn’t it? Aren’t we usually choosing between one or the other?



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Boz

posted June 13, 2010 at 1:40 pm


Rod,
Interesting thread, especially for someone who has never owned a home but watched the travails of 20-something friends who purchased in the last five years.
One broader theme in a lot of the financial crisis writing is the changes in life expectations that it will bring about. Consumerism, having lots of stuff, traveling lots of places–maybe not possible for most of us. Arcane academic degrees financed by student loan debt–very unwise. Houses that steadily appreciate in value and are a source of wealth in retirement–gone.
How about a thread on what advice you would give your children about how to structure their lives? Would there be any unusual commonalities cutting across conventional right/ left lines? I got an advanced degree after finishing undergrad and I definitely struggled to explain my decisions to other people who embarked (or continued) on the path of adult consumerism (cars, jobs, houses, commutes, vacations, buying stuff).



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Jon

posted June 13, 2010 at 2:20 pm


Re: Ahh, there’s the rub, isn’t it? Aren’t we usually choosing between one or the other?
Not necessarily. There are a few places at least where jobs are reasonably plentiful (or at least still exist) and where the housing is cheap: basically the entire plain states region, from Dallas on up to Fargo.



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armchair pessimist

posted June 13, 2010 at 3:42 pm


So, Rod, was your dog Roscoe (?) able to join you in your new digs? Did your chickens go to the knackers?



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